ICANN and those gTLDs again: another view

There are invariably two sides to any dispute --
and Merpel is happy to take on her adversaries

Merpel has let off her head of steam concerning ICANN, and this has attracted the attention of World Trademark Review's Adam Smith.  Writes Adam:

"The $185,000 application fee is allegedly calculated on a cost-recovery basis, rather than being a money grab by ICANN. Moreover, it is an investment that is small relative to the amount of money a successful gTLD applicant could earn from it. If you win the right to run .blog, for example, how many domain name registrations in that space could you sell at $10 a pop? [A gTLD which is wholly generic or descriptive is always likely to have massively profitable prospects -- but these aren't the ones that brand owners tend to be unhappy about] While brands are not likely to generate revenue from their .brand, phasing out all existing domain names (imagine how many, say, Mars Chocolate owns) and folding every brand under your own .brand could prove cost-effective [This is presumably on the assumption that phased-out names will remain off the market and unavailable for others]. Moreover, the high fee will deter bad actors from applying – something brand owners would support (although the flip side is, of course, the potential cost if seeking to register gTLDs for a multitude of brands!) [Wikipedia lists Nestle as having over 370 brands. Allowing for some duplication, if the company decided to go for gTLDs for just 150 of them, that's not much less than $28 million up-front].

A scenario in which Google or Facebook “snaffle up lots of words including surnames” would not come to pass - under the rules, it would not be possible for this to happen [Can we have legal ruling on this, please?]. Nor do I think those companies would be interested in attempting to do such a thing - Facebook may rather apply to run .facebook, and offer a domain name registration within that space to users and brands, thus www.adamsmith.facebook. Fans of Facebook would probably salivate at this prospect. How about that as a brand experience?

Returning to the fee, ICANN will not make a profit of 70% on every unsuccessful application – it is worth noting that ICANN is a non-profit (the fee breakdown is available here from page 23 onwards). That said, questions do remain over ICANN’s fiscal situation should it receive 10 applications or 1,000. Similarly, controversy remains over the war chest it is compiling to fund any later legal fees, as we have covered in WTR:

…the Internet Corporation for Assigned Names and Numbers (ICANN) plans to amass a hefty war chest to fight lawsuits arising from the expansion. The cash will come from the fees paid by applicants wishing to run a new generic toplevel domain (gTLD) space. ICANN intends to set aside $60,000 from every fee received for “risk costs” – that’s almost one-third of the full $185,000 fee. Based on ICANN’s prediction of 500 new generic TLD applications, this could raise $30 million for the non-profit organisation.

When WTR asked Peter Dengate Thrush, chair of ICANN’s board, for the reasoning behind the risk tax, he answered: “Prudence. If we hadn’t done it, we would be highly criticised when the first lawsuits appeared. What fuels prudence is the uncertainty factor.”  

The fund reveals not only that ICANN is arming itself for legal battles, but that it has put a figure on how much it may need. “All of the costings have gone through rigorous analyses,” Dengate Thrush explained. “We’ve taken financial advice and looked at buying insurance against the cost of litigation.” When asked whether this implied that the board expected litigation, he replied: “No, it’s just prudence – most people have life insurance.” 

But life insurance policyholders know that they are going to die. [Good point!]

Finally, I believe that WIPO will be concerned by the implication that it did not fully understand ICANN’s plans during its consultation process. WIPO has sent a delegation to many, if not all, ICANN meetings and has submitted comments at every stage in the consultation [Sending delegations and submitting comments is not evidence that any organisation has mastered the issues and, after the apparent lack of effective engagement by WIPO with UNCITRAL in the latter's work on security interests in IP as intangibles, brand owners may be forgiven for thinking that WIPO's larger agenda and responsibilities may prevent it from taking up cudgels on their behalf even if it should be disposed to do so] The organisation’s arguments are usually well constructed, even if they do bear all the hallmarks of Geneva’s bureaucracy. That WIPO has been limited to submitting statements and has not been consulted by ICANN to the same extent as governments have must irk WIPO no end, but it has played along nevertheless.

At present, uncertainty surrounds the impact of the new gTLD programme, so it’s important that IP owners, the IP press, industry and the public at large address the facts. As such a well-respected blog, IPKat should provide as informed a picture as possible about the gTLD regime – both its positives and negatives (and there are plenty of each!)".

Thanks, Adam: it's always good to hear from you. This Kat suspects that he and Merpel may be hearing from others too in the near future ...

Artwork: 'Table Tennis Cats' by icequeen5560, hosted on photobucket.

ICANN: a dream at last coming true, or a legal scam?

Merpel gets around a fair bit these days. Being a fictional Kat she can sneak into all sorts of places and eavesdrop on some fascinating events. This is her report on what she did yesterday:

"I attended a meeting at the London offices of a well-known law firm re the Internet Corporation for Assigned Names and Numbers (ICANN). An ICANN Top Dog attended with some colleagues and spoke at length about the many and varied delights of the new generic Top Level Domains (gTLDs), though not everyone in the audience was as delighted as the ICANN folk were. One articulate lady, in particular, may have made herself not a little unpopular for sharing her own opinions to the contrary -- though after the event some folk who were reticent about supporting her views and remained silent throughout did at least have the good grace to come up to her afterwards in order to thank her and assure her of their own outrage.



The point in contention is this. Have you seen how much it costs to play this high stakes gTLD game? You have to pay US$ 185,000 to play -- with no guarantee that you will even be able to get the domain you want. If you are unsuccessful, ICANN refunds 30% of your US$ 185,000. And that's just the start. If you do succeed in getting the domain of your dreams, you will then have to stump up at least US$ 25,000 annually -- with lots of other costs tacked on.

If this were another world, and a more rational one, we might be tempted to described this operation as a scam. Companies that are as cash-rich as Google [which, on revenue of US$ 9bn in the last quarter, brings in US$ 185,000 every three seconds] and Facebook will snaffle up lots of words including surnames and then, assuming that they expect to see a return on their investment, will presumably charge people to use them. This would be sad. Once upon a time some of us believed that the whole reasoning behind the internet was that it was essentially free and open for all -- but the effect of the new gTLD regime is likely to change this -- and not for the better. The ICANN folk agreed, but said that it was inevitable that things would change and that this was a done deal and cannot be stopped".

Merpel is fairly sure she heard someone saying:

"This is about managing risks to your brand and, when brand owners assess the risk, they will realise that they have to be part of this and join in".

So is this what the new gTLD scheme is about: creating risks for brand owners to take, and leaving ICANN to make a profit of 70% on every unsuccessful application? Merpel is not averse to the principle of gTLDs but, the more she thinks about it, the more she feels the system which has been devised for them unfairly benefits ICANN and the speculation of businesses that have no inherent legal or moral claim to the use of the vast spread of new names that so many businesses and individuals have been encouraged to welcome so warmly.



Merpel has been speed-reading through the Hargreaves Review's Digital Opportunity again and doesn't seem to have spotted the words 'ICANN' or 'gTLD' in it. She also wonders whether the organisations that are the custodians of intellectual property interests internationally such as WIPO and WTO may have fully understood the detailed implications of this new and apparently unstoppable development at the time when ICANN went through its consultation process.

ICANN goes ahead -- and the world will never be the same again

All this talk of domains
can make a Kat go dotty ..

With a somewhat leaden heart, this Kat has been reading the news, courtesy of Guardian Online, that internet naming board ICANN has approved the long-expected vast expansion of domain suffixes to the existing 22 international global top level domains (gTLDs).  According to the article,

"Twenty-six years after .com was first unveiled to the world, officials have swept away tight regulations governing website naming, opening up a whole world of personalised web address suffixes. ...

Peter Dengate Thrush, chairman of Icann's board of directors, said: "Today's decision will usher in a new internet age. We have provided a platform for the next generation of creativity and inspiration [this Kat wonders what Mr Thrush's definitions of creativity and inspiration look like]. Unless there is a good reason to restrain it, innovation should be allowed to run free."

Analysts say they expect 500 to 1,000 domain suffixes, mostly for companies and products looking to stamp their mark on web addresses, but also for cities and generic names such as .bank or .hotel. Websites can now be categorised by subjects such as industry, geography and ethnicity – as well as using Arabic, Chinese and other scripts [this should be fun, says Merpel, who wonders how quickly Western Kats will learn to identify the main ones, for good or ill].  ...it will also now be possible to have website names entirely in Mandarin or Cyrillic or any other script, which will ease the problem of reading and writing addresses for the majority of people who do not use the Roman alphabet.

The growth will also come as the internet shifts to the next-generation IPv6 addressing system for its basic systems, which enables far more devices to be attached to the internet [The IPKat has already managed to attach his fridge and his toaster, but he's struggling to get his vacuum cleaner into the USB port].

ICANN approved the move after six years of negotiations, in which concerns were repeatedly expressed that the enormous expansion of suffixes could lead to extra costs for businesses of registering a site with their trademark as the number of suffixes explodes.During the 1990s there were hundreds of cases of "domain squatting" in which people would register sites that used companies' trademarked names, effectively holding them to ransom. Expanding the number of domains could make that far worse.[Only during the 1990s? And only 'hundreds'?]

But it would also ease the pressure on the ".com" domain, created 26 years ago. In May 2009 a study found that 74% of websites were in the .com domain space. ...

... [O]thers said that the promise of space could be a double-edged sword. "If you're a company with a lot of money, such as Barclays, then you could buy the '.barclays' suffix and build a little island on the internet, on the basis that you can persuade customers that only legitimate Barclays sites will end with that," said Charlie Abrahams, of the brand protection company MarkMonitor. "If your brand has just three letters, it might be worth it. If you're Tommy Hilfiger, it's probably not, because I can't imagine anyone bothering to type all that at the end of a URL." [The IPKat gave up typing URLs years ago; he clicks them when they're hyperlinks and cuts and pastes them into his browser when they're not]

However, the principal beneficiaries are likely to be the internet registrars who sell the rights to site names. ICANN has set a $185,000 fee per suffix, and applicants have to work their way through a 360-page guidebook to prepare their bids ahead of the first suffix auctions, which start on 12 January 2012 and run for 90 days. ICANN says it will auction suffixes if multiple parties have legitimate claims [Apple? Prudential? Polo? Washington? Birmingham? Madonna? Cambridge? EPO? This one can run and run ...]. However, it expects companies will reach deals to avoid a public auction [No they won't, says Merpel, if the hawk-eyed competition folk at the European Commission have anything to do with it and sniff the comfortable scent of collusion between competitors ...]. ...

The ICANN board approved the move by 13 votes to one with two abstentions in a meeting in Singapore. ... The move could also create enormous confusion for consumers and companies. It greatly expands the risks from "phishing" sites because they could use confusing domain names in language scripts that look similar to existing ones to capture peoples' details. And for companies, the challenge will be to decide whether to register their names in all possible domains, or to create their own suffix, or to limit themselves to a small number of domains."

What do readers think? The IPKat is running a little poll for the next week near the top of his side bar. Be sure to let him -- and Merpel -- know!